Market movers today

Today’s key event will be the Bank of England meeting. Amid the ongoing Brexit uncertainty, we expect the Bank of England to be on hold until November. The new forecasts are likely to show a downward revision to the growth and inflation paths.

Watch out for Brexit headlines, as Theresa May is expected back in Brussels today, trying to garner support for concessions on the Irish border backstop (see Brexit Monitor: May has two and half weeks to renegotiate the backstop, 30 January) . She is scheduled to meet Commission President Juncker at 11:00 CET.

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In Germany, yesterday’s factory order data pointed to tentative signs that the car sector recovery started to pick up speed at the end of 2018. It will be interesting to see whether today’s December industrial production data shows a similar trend and whether the big drop in pharma production in November has reversed (see Research Germany – The epicentre of the euro area slowdown, 27 January).

Later in the morning, the European Commission will also release its new economic forecasts. Markets will particularly pay attention to the extent of cuts to the euro area growth prospects.

In Sweden, house prices and budget balance figures for January are in focus, while industrial production data is due out in Norway and Denmark.

Selected market news

According to The Telegraph (paywall), PM Theresa May is preparing to delay the second vote on her Brexit deal from next week until the end of February (which means Article 50 deadline is likely to be extended, at least for technical reasons, as the UK would need more time to pass the necessary legislation), as PM May is still negotiating with the EU (although EU Council President Donald Tusk’s comments yesterday have not made life easier for May, see YouTube clip). Labour leader Jeremy Corbyn has also presented new demands for supporting a Brexit deal. Corbyn still wants a permanent customs union with the EU and wants the UK to stay closely aligned to the single market (see all demands in The Guardian ), something the Conservative Brexiteers will never support. With less than two months to go, the UK remains divided and pressure is increasing. Note that Theresa May is expected to visit Brussels today.

US equities were softer yesterday with NASDAQ taking the lead down on weak earnings reports. The market also continues to focus on the trade war concerns and the risk of a new government shutdown looming. The risk of the latter is still high given that the State of the Union gave little hope of a compromise. The weaker risk appetite gave some support to US Treasuries and EUR/USD edged lower. The negative sentiment has been carried over to Asia and Nikkei is down this morning. Note that Hang Seng is closed due to Chinese New Year. Yesterday, the strong demand for European bonds continued as Italy sold EUR8bn in a new 30Y bond and attracted bids for more than EUR41bn.

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